In the UK, obtaining a mortgage when you're self-employed can be a bit more challenging compared to if you are employed full-time by a company. Lenders typically require more documentation and proof of income to assess your eligibility and determine the amount you can borrow. Here are some key differences and things to consider when applying for a mortgage in the UK if you're self-employed:

 

What is different about a mortgage in the UK if youre self employed

 

  1. Proof of Income

Traditional Employees: If you are employed, lenders usually require recent payslips or P60 forms as proof of income.

Self-Employed Individuals: As a self-employed individual, you need to provide several years' worth of accounts or tax returns (usually at least two to three years). This demonstrates your income and helps lenders assess your affordability. Some lenders might consider one year's accounts for established sole traders or contractors.

  1. Tax Efficiency

Self-employed individuals often reduce their taxable income through various deductible expenses. While this is financially prudent, it can make it challenging to demonstrate a high income to lenders.

  1. Credit History

Your credit score and credit history play a significant role in mortgage approval. A good credit history is crucial for self-employed individuals, just as it is for employed applicants.

  1. Deposit

The size of your deposit matters. A larger deposit can sometimes compensate for a less predictable income, making lenders more willing to offer you a mortgage.

 

What is different about a mortgage in the UK if youre self employed 2

 

  1. Stability and Consistency

Lenders prefer to see stability and consistency in your self-employed income. Erratic or declining income can be a concern for them.

  1. Specialist Lenders

Some lenders specialise in providing mortgages for self-employed individuals. These lenders might be more flexible in their assessment criteria.

  1. Mortgage Brokers

It can be incredibly beneficial to work with a mortgage broker, such as ourselves, especially if you're self-employed. We have access to a wide range of lenders, including those that offer mortgages to self-employed individuals, and can help you find the most suitable deal.

  1. Interest Rates

The interest rates offered to self-employed individuals might sometimes be higher compared to those offered to employed individuals, especially if your income is considered less stable.

  1. Future Income Projections

Some lenders might consider your future income projections if your business is growing. However, this varies from lender to lender.

It's essential to prepare all necessary financial documents, maintain a good credit history, and consider seeking advice from a mortgage broker to improve your chances of getting a mortgage when you're self-employed in the UK. Remember, the mortgage market and regulations are subject to change, so staying updated with the latest information is crucial. To book a free, no-obligation appointment with one of our self-employed mortgage specialists, simply visit our website.


You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.
MAB 16622